2019 (3) TMI 813 - HC - Income Tax

Reopening of assessment - Reason to belief- Addition u/s 69 was made in assessment u/s 143(3) r.w.s 153A - Addition deleted by CIT(A) - no appeal filed before ITAT - Notice for 148 was issued based on same material found in search - HELD THAT - An income has been held to be income chargeable to tax in the proceedings u/s 143(3) r.w.s 153A of the Act and has been added to the income of the petitioner under section 69 of the Act, the very same income thereafter cannot be said to be income which has escaped assessment, inasmuch as such income has already been assessed. Therefore, on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment, inasmuch as such income has already been assessed u/s 143(3) r.w.s 153A of the Act. The assumption of jurisdiction under section 147 of the Act on the part of the Assessing Officer therefore, lacks validity and hence, cannot be sustained. Earlier an assessment order u/s 143(3) r.w.s 153A of the Act had been made making an addition under section 69 of the Act. Against the said order, the petitioner went in appeal before the Commissioner (Appeals), who by an order dated 11.8.2017, held in favour of the petitioner insofar as the addition made under section 69 of the Act is concerned. Thus, the order of the Assessing Officer insofar as the issue in respect of which the assessment is sought to be reopened, has merged with the order passed by the Commissioner (Appeals). The third proviso to section 147 postulates that the AO may assess or re-assess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax or escaped assessment. Thus, the third proviso to section 147 of the Act permits the Assessing Officer to assess or re-assess only such income which was not subject matter of appeal, reference or revision. In the present case, the Assessing Officer seeks to reopen the assessment in respect of income involving a matter which was subject matter of appeal before the Commissioner (Appeals). The reopening of assessment by the impugned notice under section 148 of the Act is, therefore, also hit by the third proviso to section 147 of the Act and is not permissible in law. - Decided in favour of assessee.

Issues Involved:
1. Validity of reopening assessment under section 147 of the Income Tax Act.
2. Jurisdiction of the Assessing Officer based on new material found.
3. Application of the principle of merger.
4. Requirement of sanction under section 151 of the Act.

Detailed Analysis:

1. Validity of Reopening Assessment under Section 147 of the Income Tax Act:
The petitioner challenged the reopening of assessment on the grounds that the addition of ?3,00,000/- was previously adjudicated and thus, reopening the same assessment was not tenable. The court noted that the unexplained cash payment of ?3,00,000/- was already assessed under section 143(3) read with section 153A of the Act. Therefore, the same amount could not be considered as having "escaped assessment" since it was already assessed. Consequently, the assumption of jurisdiction under section 147 by the Assessing Officer was deemed invalid.

2. Jurisdiction of the Assessing Officer Based on New Material Found:
The respondent argued that the reopening was based on new material found during a search at J.P. Iscon Pvt. Ltd., which showed that the petitioner had made cash payments totaling ?56,45,000/-, including ?3,00,000/- for the year under consideration. The court, however, found that the same ?3,00,000/- was already the subject of assessment in the previous proceedings. Hence, the new material did not provide a valid basis for reopening the assessment.

3. Application of the Principle of Merger:
The petitioner contended that the principle of merger applied, as the issue of ?3,00,000/- had already been adjudicated by the Commissioner (Appeals). The court agreed, citing the third proviso to section 147 of the Act, which states that income involving matters already subject to appeal cannot be reassessed. Since the addition of ?3,00,000/- was already deleted by the Commissioner (Appeals) and no further appeal was filed by the Revenue, the issue had merged with the appellate order. Therefore, reopening the assessment on the same issue was not permissible.

4. Requirement of Sanction under Section 151 of the Act:
The petitioner argued that the sanction under section 151 was either not granted or was mechanically granted. The respondent countered that the notice under section 148 was issued after obtaining the necessary approval. The court did not find substantial evidence to dispute the respondent's claim regarding the sanction. However, given the invalidity of reopening under other grounds, this issue became secondary.

Conclusion:
The court concluded that the reopening of the assessment was not valid because the same income of ?3,00,000/- had already been assessed and adjudicated upon. The principle of merger and the provisions of section 147, specifically the third proviso, further supported the invalidity of the reopening. Consequently, the impugned notice dated 30.3.2018 issued under section 148 was quashed and set aside.

Final Order:
The petition was allowed, and the impugned notice under section 148 of the Income Tax Act, 1961, was quashed. The rule was made absolute with no order as to costs.

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